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Old 04-06-2009, 09:46 AM
 
Location: NJ
854 posts, read 2,614,819 times
Reputation: 500

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Hi all,

so for quite a long time I've been driving a beater and saved money for a new car. I could put down about 14k (please no discussion about what car to buy). Now there are a lot of 0% financing deals out there, and people are telling me I would be stupid to put down that much money on a 0% financing deal instead of putting it into a CD. My reasoning however is, that i'd rather put down some more $$ and have a small monthly payment, because otherwise I'd run into the risk of spending the "intended" down payment elsewhere. I know myself

Is it really that stupid to put down a large amount on a 0% deal? Am I missing something here?!
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Old 04-06-2009, 10:13 AM
 
Location: northern mi
37 posts, read 168,818 times
Reputation: 33
Is it really that stupid to put down a large amount on a 0% deal? Am I missing something here?!

NO!! This is the thinking that has got us to where we are at in the economy.
Sure you may gain a few dollors by investing your down payment however you answered your own question My reasoning however is, that i'd rather put down some more $$ and have a small monthly payment, because otherwise I'd run into the risk of spending the "intended" down payment elsewhere. I know myself Also people never think of what might happen during the life of the loan.No matter how small the chance,at some point you might have a hard time paying. For me, the fact that I can make it even if things get really bad is $$priceless$$.

trapper

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Old 04-06-2009, 10:22 AM
 
830 posts, read 2,663,875 times
Reputation: 382
Since you know yourself the better choice would be to make the downpayment.

The flip side to that is if you don't put down the downpayment, you'll $14,000 set aside in case you get in trouble, like lose your job. When you put the downpayment down, that's gone, forever, unless you sell the car, and then you'll take an immediate hit on the sales price.

If you want, I'll hold the $14,000 for you so you won't spend it. :-)
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Old 04-06-2009, 10:27 AM
 
Location: Apex, NC
3,122 posts, read 7,758,065 times
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Quote:
Originally Posted by motoman View Post
Since you know yourself the better choice would be to make the downpayment.

The flip side to that is if you don't put down the downpayment, you'll $14,000 set aside in case you get in trouble, like lose your job. When you put the downpayment down, that's gone, forever, unless you sell the car, and then you'll take an immediate hit on the sales price.

If you want, I'll hold the $14,000 for you so you won't spend it. :-)
I agree with Motoman. I recently bought a new SUV at 0% for 5 years. I didn't put down one cent! My thinking is that I'll keep that extra money for my rainy day account (currently a money market account with 2.62 apr). I already can make the higher payments and this way if it all goes to hell I'll at least have extra cash to put food on the table, even if they do repo the car. If I had put the money down, then the money would be gone and so would the car.
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Old 04-06-2009, 10:36 AM
 
1,403 posts, read 3,251,799 times
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If it were me: I'd take the 0% financing and use someone else's money for the term of the loan (probably 60 months right?).

If it were me: I'd then figure out what my monthly payment and start making payments on that loan starting now (assuming there is no pre-payment penalty in the terms of the loan). I'd make these payments by taking the money directly from my paycheck since I probably had been doing this all along in order to get the original 14K I have sitting in the bank right now. If I couldn't afford to make those payments out of my monthly paycheck, I'd probably look for a cheaper car.

If it were me: I'd keep that 14K on hand for emergencies...maybe in a high-yield saving's account or cycle the money through some CD's to earn some more interest. (This assumes that I don't have any credit card debt, which would change my strategy somewhat).

If it were me and I wanted to spend the 14k on the car now in fear that I would spend it somewhere else later: I would tell myself to get a grip, be responsible about my spending habits and stick to my budget. My plan would be to use the credit to my advantage, not GET USED by credit.

If it were me, that is...
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Old 04-06-2009, 10:49 AM
 
Location: San Jose, CA
7,688 posts, read 26,842,520 times
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0% APR financing itself is a no-brainer, put as little down as you possibly can. You can earn interest on the money while you're making payments, so effectively you're getting paid to finance a car.

Whether you should buy a new car at all is another matter. You should be prepared to drive it for a long time and keep good records. One-owner cars hold their value comparatively well on the secondary market, but you're still throwing a lot of money out the window.
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Old 04-06-2009, 11:25 AM
 
Location: mass
2,905 posts, read 6,821,950 times
Reputation: 4988
Quote:
Originally Posted by diddiyo View Post
Hi all,

so for quite a long time I've been driving a beater and saved money for a new car. I could put down about 14k (please no discussion about what car to buy). Now there are a lot of 0% financing deals out there, and people are telling me I would be stupid to put down that much money on a 0% financing deal instead of putting it into a CD. My reasoning however is, that i'd rather put down some more $$ and have a small monthly payment, because otherwise I'd run into the risk of spending the "intended" down payment elsewhere. I know myself

Is it really that stupid to put down a large amount on a 0% deal? Am I missing something here?!
I'd save it or put it towards other higher interest debt if you have any.

I wouldn't put it towards a 0 interest loan unless you don't have any other debt or you've already got $ in savings.

Regarding you running the risk of spending it on something else if you don't put it towards the car, well if you couldn't control yourself you woudl never have been able to save the 14K in the first place!!!

You are obviously doing something right.

If you are afraid you'll blow it, go ahead and put it in a CD.

Unless you need the car payment to be lower so that you can afford it, I wouldn't put it toward the car. (But don't blow it either.)
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Old 04-06-2009, 11:51 AM
 
2,779 posts, read 4,947,026 times
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I'd pass on the 0% financing and buy a 14K car. Assuming you have some other savings for an emergency...if you don't then I'd put the 14K away as an emergency fund and then save for a car.

But, I tend to be conservative about these things and don't like owing money to anyone.
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Old 04-06-2009, 12:24 PM
 
13,673 posts, read 23,847,451 times
Reputation: 13947
S
Quote:
Originally Posted by diddiyo View Post
Hi all,

so for quite a long time I've been driving a beater and saved money for a new car. I could put down about 14k (please no discussion about what car to buy). Now there are a lot of 0% financing deals out there, and people are telling me I would be stupid to put down that much money on a 0% financing deal instead of putting it into a CD. My reasoning however is, that i'd rather put down some more $$ and have a small monthly payment, because otherwise I'd run into the risk of spending the "intended" down payment elsewhere. I know myself

Is it really that stupid to put down a large amount on a 0% deal? Am I missing something here?!
If you put the money in a CD you can't touch it either, I don't understand your thought process. You're saying you'd take the money out of the CD and pay the penalty and spend it if you don't put it down on the car? Really? How did you save $14k for a new car in the first place?

Personally I think you are taking a bigger risk by putting the money down on a car financed at 0%. So yes I'd say that it was a stupid move. IMO.
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Old 04-06-2009, 12:37 PM
 
26,863 posts, read 41,964,597 times
Reputation: 15114
I would pay the car off and don't have to deal with payments that can be forgotten...so interest will go up and you have to deal with the SMALL print. There is always a catch when you read the fine print...
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